Southern Indus. of Clover, Ltd. v Tex-Cellence, Inc.

[*1] Southern Indus. of Clover, Ltd. v Tex-Cellence, Inc. 2005 NY Slip Op 50480(U) Decided on March 21, 2005 Supreme Court, Bronx County Roman, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through November 16, 2006; it will not be published in the printed Official Reports.

Decided on March 21, 2005
Supreme Court, Bronx County

Southern Industries of Clover, Ltd., Plaintiff(s),

against

Tex-Cellence, Inc., Defendant(s).



18087/04

Nelson S. Roman, J.

Defendant moves seeking an order dismissing the within action pursuant to CPLR §3211(a)(8) and CPLR §327. Defendant asserts that the court, and in fact New York State, has no personal jurisdiction over the defendant. Defendant asserts that there is no basis for personal jurisdiction pursuant to CPLR §301 nor can the court obtain jurisdiction pursuant to CPLR §302. Alternatively, defendant asserts that even if jurisdiction is warranted, the case should nonetheless be dismissed pursuant to CPLR §327 and the doctrine of Forum Non Conveniens. Plaintiff opposes the instant motion asserting that the court has jurisdiction over the defendant pursuant to CPLR §302(a)(1). Moreover, plaintiff asserts that the defendant has not made an adequate showing to warrant dismissal of the action pursuant to CPLR §327. Lastly, plaintiff asserts that the court has jurisdiction over the defendant by virtue of some provisions in the agreement at issue.

For the reasons that follow hereinafter, defendant's motion is granted. On these facts, the court finds no basis for jurisdiction.

This as an action for breach of contract where it is alleged that goods were ordered, provided, but never paid for. It is alleged that defendant owes plaintiff $73,575 exclusive of interest and costs.

Plaintiff's complaint alleges the following. That plaintiff is a yarn wholesaler with its principal place of business in Bronx County, New York. That defendant is a corporation with its principal place of business in Los Angeles, California. It is alleged that at all relevant times defendant transacted business with the plaintiff within Bronx County and that the agreement giving rise to this suit was consummated in Bronx County, New York. The action stems from a contract entered into on February 27, 2003, whereby plaintiff was to provide defendant with cotton yarn for the agreed upon price of $73, 575. Said yarn was provided and despite requests for payment, defendant has failed to pay the debt owed. [*2]

In support of the motion for dismissal, defendant submits two affidavits from Bill Asher Shalom (Shalom) an officer with defendant company. Shalom states that defendant company is authorized to do business in California only. It is defendant's business to manufacture and supply circular knit fabrics. Defendant does asserts that it conducts no business in New York, has no agent to accept service in New York, has no office, telephone, or facsimile in New York, does not own or lease any real property in New York, does not advertise in New York except for any ads in customary trade publications, does not solicit business in New York, and does not attend New York other than for industry trade shows. With respect to the contract in question, Shalom states that it was negotiated in person in California and at times over the telephone with plaintiff in New York. Defendant never went to New York in connection with this contract. The purchase order for the yarn was issued in California and the agreement for fulfillment of the purchase order was created in California as well. Finally, the designated place for performance and the delivery of goods was, pursuant to the contract, California. When the yarn in question was received, it was discovered that it was defective. Said yarn was tested in California and a debit memo was issued in California. It is alleged that California would be the most convenient forum to adjudicate this matter since all pertinent events occurred in California. Shalom states that when the contract was negotiated it never agreed to, nor did it ever discuss a choice of forum or arbitration clause.

Plaintiff, in opposition, submits an affidavit from Lawrence S. Kryger (Kryger), president of plaintiff company. In addition to what is already contained in the complaint and mentioned above, Kryger states that the contract at issue was negotiated in the Bronx via numerous telephone discussions, and mail and facsimile correspondence. Kryger further asserts that defendant is bound to ligate this matter in New York because the defendant was provided with several order acknowledgment forms by plaintiff, which stated that arbitration would be the method of dispute resolution and that New York would be the forum to resolve any disputes in accordance with New York law. It is alleged that defendant received these forms, kept them, and never objected to the contents therein. Lastly, Kryger asserts that defendant shipped two rolls of the allegedly defective yarn to plaintiff in New York for testing.

3211(a)(8)

When deciding a motion to dismiss a plaintiff's complaint pursuant to CPLR §3211, the Court must take all the allegations within the complaint as true. Sokoloffv. Harriman Estates Development Corp., 96 NY2d 409 (2001); Cron v. Hargro Fabrics, Inc., 91 NY2d 362 (1998). All reasonable inferences which can be drawn from the complaint and the allegations therein stated shall be resolved in favor of the plaintiff. Id. In opposition to such a motion a plaintiff may submit affidavits to remedy defects in the complaint. Id. If an affidavit is submitted for that purpose, it shall be given its most favorable intendment. Id. The Court's role when analyzing the complaint in the context of a motion to dismiss, is to determine whether the facts as alleged, fit within any cognizable legal theory. Sokoloffv. Harriman Estates Development Corp., 96 NY2d 409 (2001).

In the case of a motion to dismiss for lack of personal jurisdiction, plaintiff bears the burden of proof on the issue of jurisdiction. O'Brien v. Hackensack University Medical Center, 305 AD2d 199 (1st Dept. 2003). The law does not mandate that plaintiff make a prima facie showing of [*3]personal jurisdiction. Bunkoff General Contractors, Inc., 296 AD2d 699 (3rd Dept. 2002). Instead, plaintiff need only demonstrate that he has made a sufficient start on the issue of jurisdiction to warrant further discovery on the issue. Id. Stated another way, plaintiff need only demonstrate that there is an issue as to jurisdiction that cannot be resolved absent further discovery on that issue. Id. If questions of fact as to the issue of jurisdiction exist, the court can order a hearing to resolve the issue. EAC Systems, Inc. V. Chevie, 154 AD2d 813 (3rd Dept. 1989).

CPLR §301

According to CPLR §301, the courts of this state shall have jurisdiction "over persons, property, or status***" With respect to foreign corporations, jurisdiction under this section of the CPLR shall only be warranted if it can be shown that the foreign corporation is "engaged in such a continuous and systematic course of 'doing business' here as to warrant a finding of it's 'presence' in this jurisdiction." Laufer v. Ostrow, 55 NY2d 305, 310 (1982). Ultimately, the test is simple and pragmatic. Id. Jurisdiction is established if in the aggregate the corporation's activities within the state, viewed as a whole, establish that the corporation is present within the state "not causally, but with a fair measure of permanence and continuity." Id. Additionally, jurisdiction is warranted if the corporation's contacts with the state are sufficient so as to justify, based on traditional notions of fair play and substantial justice, that defendant defend the action in this state. Id.

Solicitation absent activities of substance fail to establish that a corporation is present and doing business within the state. Id. The court in ascertaining whether, for purposes of jurisdiction, a foreign corporation is present and doing business in New York, can look at factors like whether the corporation leases office space in New York, whether it employs people within New York, whether it has a bank account in New York, and whether it does publicity or public relations work within the state. Frummer v. Hilton Hotels International, Inc., 19 NY2d 533 (1967).

CPLR §302(a)(1)

New York, in enacting legislation comporting to the law as prescribed by the Supreme Court, enacted CPLR §302(a)(1). Kreutter v. McFaden Oil Corp., 71 NY2d 460 (1988). The statute was enacted bearing in mind the language used by the court in cases like McGee v. International Life Ins. Co., 355 U.S. 220 (1957), where the court stated that a non-domiciliary is subject to the jurisdiction of this state provided he avails himself of the benefits of the forum, has sufficient minimum contacts with the forum, and should reasonably expect to defend its actions in the forum.

According to CPLR §302 and §302(a)(1), the courts of this state "can exercise personal jurisdiction over any non-domiciliary***who in person or thorough his agent: 1. transacts any business within the state or contracts anywhere to supply goods or services in the state***. However, such jurisdiction can only be exercised if the cause of action asserted arises from the very transaction or acts upon which jurisdiction is being asserted. Longines-Wittnauer Watch Co., Inc. v. Barnes & Reinecke, Incorporated, 15 NY2d 443 (1965). Transacting business has been defined as any purposeful activity within the state. Id.; McGowan v. Smith, 52 NY2d 268 (1981). The purposeful activities usually mean any acts, by which it can be said that a person has "purposefully [*4]availed himself of conducting activities in our jurisdiction, thus invoking the benefits and protections of our laws." George Reiner and Co., Inc., v. Schwartz, 41 NY2d 648, 653 (1977). Thus, jurisdiction pursuant to CPLR §302(a)(1), is premised on a two prong test. Laborers Local 17 Health Benefits Fund v. Phillip Morris, Inc., 26 F. Supp. 2d 593 (S.D.NY 1998). First, it must be established that the defendant transacted business within New York and that the cause of action arises therefrom. Id. Second, there must be a substantial relationship between the instate activities and the transaction from which the cause of action arose. Id.

Unlike CPLR §301 which generally requires that a party be present and doing business in the state to confer jurisdiction, CPLR §302(a)(1) is a "single act statute," meaning that proof of one transaction, provided that the transaction is the result of purposeful activities and the claim asserted is substantially related to said transaction, is sufficient to confer jurisdiction. Kreutter v. McFaden Oil Corp., 71 NY2d 460 (1988). Jurisdiction pursuant to CPLR §302(a)(1) can be found even if defendant never physically entered the state. Id.

When it is alleged that the execution of a contract is the basis for concluding that a defendant was transacting business in this state; that the contract was executed outside the state, is not by itself, dispositive. Longines-Wittnauer Watch Co., Inc. v. Barnes & Reinecke, Incorporated, 15 NY2d 443 (1965); Libra Global Technology Services (UK) Limited v. Telemedia International, LTD., 279 AD2d 326 (1st Dept. 2001). Instead, the inquiry is one that involves the examination of any other purposeful acts on defendant's behalf which in the aggregate may demonstrate that defendant has purposefully availed himself of the benefits and protections of this state. Longines-Wittnauer Watch Co., Inc. v. Barnes & Reinecke, Incorporated, 15 NY2d 443 (1965). Thus, the court in Longines, was of the opinion that if there exist enough purposeful activities, the fact that a contract was executed without the state, does not defeat jurisdiction. Id.

The court has held that there is no business transaction sufficient to warrant CPLR §302(a)(1) jurisdiction when the only evidence of business is an offer placed outside the state and received and accepted via telephone in New York. Glassman v. Hyder, 23 NY2d 354 (1968). For purposes of jurisdiction, no finding that defendant transacted business will be found when a contract is negotiated in New York, signed by plaintiff outside the state and returned to New York for plaintiff's signature. Id. Merely shipping goods to New York without other purposeful activities within New York will not give rise to CPLR §302(a)(1) jurisdiction. McGowan v. Smith, 52 NY2d 268 (1981). Solicitation of business within New York without additional business transactions within the state do not give rise CPLR §302(a)(1) jurisdiction. O'Brien v. Hackensack University Medical Center, 305 AD2d 199 (1st Dept. 2003). Telephone calls from defendant coupled with letters sent to plaintiff in New York is insufficient, without more, for CPLR §302(a)(1) jurisdiction. Edelman v. Taittinger, 298 AD2d 301 (ast Dept. 2002). In Professional Personnel Management Corp., v. Southwest Medical Associates, Inc., 216 AD2d 958 (4th Dept. 1995), the court concluded that plaintiff had failed to demonstrate CPLR §302(a)(1) jurisdiction over the non domiciliary defendant when it was established that defendant's only contact with New York was negotiations by telephone, and facsimile. In Success Marketing Electronics, Inc., v. titan Security, Inc., 204 AD2d 711 (2nd Dept. 1994), the court held that no CPLR §302(a)(1) jurisdiction existed when defendant's contact with New York consisted of merely negotiating a contract with plaintiff via facsimile and mail and all [*5]activities in relation to that contract within New York were performed by the resident plaintiff. In Rothschild v. Thompson, 78 AD2d 795 (1st Dept. 1980), the court found that defendant had conducted purposeful activity within New York state despite the fact he never entered the state and negotiated all transactions via mail and telephone. However, in that case defendant not only conducted 25 transactions in a four month period, but he executed an agreement stating New York law would apply. Id. In Otterbourg, Steindler, Houston & Rosen, P.C., v Sherve City Aprtments, Ltd., 147 AD2d 327 (1st Dept. 1989), the Court found that defendants were subject to jurisdiction pursuant to CPLR §302(a)(1), after reviewing evidence of an ongoing attorney-client relationship, where defendant communicated by phone some 93 times, sent numerous letters into New York, and participated, via telephone, in lengthy negotiations. Moreover, in that case, defendant entered into an agreement where it agreed to be governed by New York Law. Id. In Parke-Bernet Galleries, Inc., v. Franklyn, 26 NY2d 13 (1969), the court found jurisdiction pursuant to CPLR §302(a)(1) only after it reviewed evidence that defendant had participated in an auction by telephone where he was directing another person which the court deemed his agent. The telephone conversation was lengthy, and even though the defendant never physically came to New York, the court found that due to length and nature of the call he had projected his presence into the state to conduct his business. Id. Moreover, the court, recognizing that the telephone call may not have been sufficient to confer jurisdiction stated that since defendant had an agent acting on his behalf, who was present in the state, he was subject to jurisdiction on that basis. Id.

Jurisdiction and Due Process

Federal law requires that the exercise of personal jurisdiction comport with due process. Asahi Metal Industry Co., LTD., v. Superior Court of California, Solano County, 480 U.S. 102 (1987). The Supreme Court requires that no personal jurisdiction be exercised unless it is established that a defendant has, by some act, purposefully availed itself of the privileges of conducting activities in the forum state, thereby invoking the benefits and protections of that states laws. Id. Further, jurisdiction is proper if the contacts proximately result from actions by the defendant which create a substantial connection with the forum state. Id. In essence, the court requires that before jurisdiction be imposed, it be established that defendant has some minimum contact with state which were purposefully created by the defendant. Next the court requires that even if minimum contacts have been established, an inquiry be held to determine if reason dictates that said defendant be forced to defend itself in the forum state chosen by the plaintiff. With respect to reasonableness the goal is not to offend "traditional notions of fair play and substantial justice." Id. at 113. In deciding whether the forum state is a reasonable forum the court must consider the burden on the defendant, the interest of the forum state, the interest of the plaintiff in obtaining relief, and the interstate's judicial system's interests in resolving controversies. Id. It should be noted, as discussed above, that CPLR §302(a)(1) was drafted bearing these due process considerations in mind. More importantly, violation of a defendant's due process can defeat a state's law finding of jurisdiction.

CPLR §327

Pursuant to CPLR §327 the court upon motion can dismiss or stay an action when it finds [*6]that "in the interest of substantial justice the action should be heard in another forum." Such decision is well within the sound discretion of the trial court. Varkonyi v. S.A. Empresa de Viacao Airea Rio Grandense(Varig), 22 NY2d 333 (1968). In applying the doctrine of Forum Non Conveniens, the court should consider the burden on the New York courts in hearing the action, the hardship posed on the moving party, the availability of other forums in which plaintiff can seek redress, and to the extent that trying the case in this state serves the interest of the plaintiff. Id. No one factor is dispositive and when the court considers all of these factors and renders a decision, there has been no abuse of discretion. Islamic Republic of Iran v. Mohammed Reza Pahlavi, 62 NY2d 474 (1984). The mere fact that there is no other suitable forum available does not proscribe dismissal of an action under the doctrine of Forum Non Coveniens. Id.

UCC §2-207

When parties have executed a contract, even an oral one, which contains no arbitration clause, any subsequent documentation containing an arbitration agreement is to be considered an additional proposal which if not expressly accepted shall not be part of the contract and shall not be binding on any party. Marlene Industries Corp., 45 NY2d 327 (1978). Once a contract is agreed upon any subsequent proposals are governed by UCC §2-207, which if it entails non-merchants, will never be binding until expressly accepted. Id. In the case of merchants, such proposals are viewed as material alterations of the original contract so as to make such clauses non-binding until expressly accepted. Id. In Marlene, the arbitration clause at issue was part of an order acknowledgment form which came after an oral contract entered into by the parties. Id. The same law applies to documents which after a contract has been entered into seek to prescribe a choice of forum in the event of a breach. Hugo Boss Fashions, Inc., v. Sam's European Tailoring, Inc., 293 AD2d 296 (1st Dept. 2002); Pacamor Bearings, Inc., v. Molon Motors & Coil, Inc., 102 AD2d 355 (3rd Dept. 1984). To the extent that C.M.I. Clothesmakers, Inc., v. A.S.K. Knits, Inc., 85 Misc 2d 462 (Supreme Court New York County 1975), holds differently, this court of concurrent jurisdiction is not inclined to follow this lower court decision. In C.M.I., the court found that an arbitration clause became binding on the buyer of goods even though it was part of an unsigned contract which came after an oral agreement. Id. The court found that such events were governed by UCC §2-201 and that the clause became binding on the purchaser since he, as a merchant, had reason to know that the contract contained such language and the contract expressly made such clause binding in the absence of an objection. Id.

Discussion

To the extent that plaintiff, in no away, attempts to argue that jurisdiction over defendant is warranted pursuant to CPLR §301, the court must conclude that plaintiff believes that jurisdiction cannot be obtained by that statute. Moreover, to the extent that defendant does not physically conduct business within the state, does not own property in New York, does not have a bank account in New York, or otherwise solicit business in New York, it is clear that he is not present in New York nor doing business in this state so as to warrant jurisdiction pursuant to CPLR §301.

It is clear from the facts presented that there is a dispute as to where the contract herein were [*7]actually executed. However, this issue is not dispositive because as will be discussed below, there exist insufficient purposeful activities to warrant jurisdiction over defendant pursuant to CPLR §302(a)(1). Absent sufficient purposeful activities, the issue of where the contract was executed is in it of itself a non-issue. The uncontroverted evidence indicates that the contract herein was negotiated and executed by telephone, mail, facsimile, or plaintiff's presence in California. Neither one of those methods puts the defendant in New York, making where the contract was consummated or executed irrelevant.

After viewing all of the pertinent facts, the court concludes that defendant's actions, for purposes of CPLR §302(a)(1) jurisdiction, do not rise, even in the aggregate, to the level of defendant transacting business within New York as defined by the legion of cases cited above. Defendant's activities, which consist of merely ordering yarn from a New York merchant, negotiating the particulars of that order with the plaintiff via mail, telephone, and facsimile, and then attempting to have plaintiff rectify the situation by shipping plaintiff the very goods claimed to be defective are not activities sufficient to warrant long arm jurisdiction pursuant to CPLR §302(a)(1).

Assuming arguendo, that this state could exercise jurisdiction over defendant, such action would nonetheless violate defendant's due process because defendant does not have the requisite minimum contacts with New York so as to force it to defend itself in this forum. By all accounts the negotiations on defendant's behalf ensued via telephone, facsimile or mail. Any negotiations in person took place in California with plaintiff leaving New York and without defendant ever leaving California. These activities do not warrant a finding that defendant was transacting business in New York. Having found an absence of Jurisdiction, the Court need not address the issue of whether the case warrants dismissal pursuant to CPLR §327, Forum Non Conviniens. The law in that area is included merely for purposes of illustration and edification.

The record demonstrates that before defendant was sent the order acknowledgment forms there had been negotiations and some form of agreement as to the goods herein. The record also indicates, without proof to the contrary, that prior to the language contained in the order acknowledgment forms regarding arbitration and choice of forum, there had been no discussion regarding arbitration as a means of resolving potential disputes or which laws and forum would control. While plaintiff submits a copy of the order acknowledgment form, the court notes it is unsigned by defendant. Of equal significance, the document requested that defendant "sign one (1) copy and return it" to verify that defendant was in accord with all the terms indicated therein. Such written consent, however, was not obtained. Consequently, the arbitration and choice of forum clauses in the order acknowledgment forms were material alterations to the negotiations and agreements which preceded and pursuant to UCC §2-207 and controlling case law represent material alterations to the contract, which absent express agreement, do not bind defendant. In this case there has never been express agreement to the clauses at issue. Consequently, jurisdiction cannot be premised on the same.

Failing to find jurisdiction under any ground, the court hereby grants defendant's motion in its entirety. It is hereby [*8]

ORDERED that this action is hereby dismissed.

This constitutes this Court's decision and Order.

Dated :March 21, 2005

Bronx, New York ________________________________Nelson S. Roman, J.S.C.